GERMAN UNEMPLOYMENT RISES AS ECONOMIC CRISIS DEEPENS IN

UNCLAS BERLIN 000250


STATE FOR DRL/ILCSR AND EUR/AGS
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E.O. 12958: N/A
TAGS: ELAB ECON EFIN PGOV GM
SUBJECT: GERMAN UNEMPLOYMENT RISES AS ECONOMIC CRISIS DEEPENS IN
FEBRUARY


1. Summary. After long resisting the effects of the global
economic downturn, the German labor market has deteriorated
quickly since November. German unemployment increased in
February for a fourth straight month as falling exports and a
deepening recession prompted companies to cut production and
jobs. Without the widespread use of the short-time benefits
program by German companies, the overall deterioration would
have been much worse. However, the continuing slump in German
exports and decline in business investment indicate that
unemployment will increase further in the coming months,
analysts said. End Summary.


2. The adjusted jobless rate NOW stands at 7.9 percent, but the
politically more important seasonally non-adjusted unemployment
figure (the one that makes the headline news) rose by 63,000 to
3.552 million, pushing the unemployment rate to 8.5 percent.
The three most important indicators of the labor market all
moved in a negative direction: unemployment rose, employment
decreased and demand for labor declined further. Employment
Agency chief Frank-Juergen Weise reported in his press
conference that use of the short-time benefits program had
prevented an even bigger increase.


3. The number of workers taking advantage of the short time
work benefit (Kurzarbeit) programs jumped to an estimated
670,000 in January, up by about 400,000 from the previous month.
The steep month-to-month increase was a ray of hope that
companies wanted to keep their staff on pay rolls. As part of
its efforts to stimulate the economy, the German government has
broadened the "Kurzarbeit" program whereby the Federal
Employment Agency takes over a large portion of social security
payments from companies should they opt to reduce the working
hours for some employees instead of laying them off. The program
is NOW valid for 18 months, and the government hopes that the
economic downturn will be over by then and companies will be
able to resume normal operations.


4. The sharp decline in economic growth has slowed employment
growth and reversed the gains made in recent years. German
employment hit a record 40.3 million in late 2008, reaching the
highest level since German unification in 1990. Since then,
however, the global downturn has become increasingly visible as
reflected by a series of announcements by major companies such
as Chemical Giant BASF and Industrial Conglomerate Siemens to
cut working hours in Germany. Although Carmaker Volkswagen
reportedly has experienced record sales so far in 2009 (a result
of the government's 2500 Euro premium to scrap old cars),it
announced its decision to switch to a short work week for the
first time in 26 years.


5. More detailed statistical information for all of Germany is
available at the Federal Employment Agency's website:
http://www.pub.arbeitsagentur.de/hst/services /statistik

KOENIG